Cry if you want to, but the dollar is stronger. Deny it if you want to, but the US economy is more vibrant now than the Europe or Japan. This is what is shaping the investment climate, if you are interested.
The 114th Congress formally convened yesterday. In what follows, Goldman Sachs presents its views on some of the central questions regarding the political and policy outlook for the coming year. In general, Goldman expects most of the deadlines Congress faces over the coming year to result in only limited uncertainty, though the debt limit increase that will be necessary later in 2015 is the main potential exception. Additionally, they expect legislation to "audit" Fed monetary policy decisions is likely to pass the House again in 2015, but enactment looks less likely.
Chicago Fed's Charlie Evans appears to have decided to flex his voting member status, Bullard-ness this evening. Speaking during a forum in Chicago, after The FOMC Minutes showed data-dependence was the thing... Evans exclaimed "raising rates would be a catastrophe," and that "housing hasn't shown the strength he'd like to see," prompting S&P futures - with the help of USDJPY - to suddenly surge 16 points (and drag WTI Crude futures above $49.50 for fun). Nikkei futures enjoyed the ride ramping 200 points as USDJPY hit 119.70. But, much to the chagrin of the millions of freshly minted retail investors there, Chinese stocks plunged 2.2%... "we love the smell of stability in the Asian morning"
History literally appears to be repeating. The mainstream media and our politicians are promising Americans that everything is going to be okay somehow, and that seems to be good enough for most people. But the signs that another massive financial crisis is on the horizon are everywhere.
Just 2 short months ago we warned of the rising voice among the cognoscenti tilting their windmills towards the concept of "helicopter money," as Deutsche bank noted, "perhaps there's an increasing weariness that more QE globally whilst inevitable, is a blunt growth tool and that stopping it will be extremely difficult (let alone reversing it) without a positive growth shock." Committing what Commerzbank calls "the ultimate sin" is now reaching the mainstream as Germany's Der Spiegel notes it is becoming increasingly clear that Draghi and his fellow central bank leaders have exhausted all traditional means for combatting deflation; and many economists are demanding that the European Central Bank hand out money to consumers to stimulate the economy.
"In their discussion of financial market developments, participants observed that movements in asset prices over the intermeeting period appeared to have been importantly influenced by concerns about prospects for foreign economic growth and by associated expectations of monetary policy actions in Europe and Japan."
Amid all of the confusion stemming from the December dissents and disinformation, the hope was that the Minutes might add some color on global risks, inflation, and lift-off timing.
- *FED OFFICIALS SAW RATE RISE UNLIKELY BEFORE APRIL, MINUTES SHOW (Patient)
- *MANY ON FOMC SAW DOWNSIDE RISKS TO U.S. FROM GLOBAL WEAKNESS (Fear)
- *FOMC SAW OIL, DOLLAR MOVES TEMPORARILY PUSHING INFLATION LOWER (Transitory)
So The Fed is positive (jobs, US Econ), negative (global risk contagion), and neither (everything's transitory). Pre-FOMC Minutes: S&P Futs 2018.5, 10Y 1.97%, Gold $1210, WTI $48.16
The December FOMC statement revealed a lack of agreement among Fed officials over communication, BofAML explains, as evidenced by the complicated extension of the forward guidance language and the dissents from both sides of the hawk-dove spectrum. While Standard Chartered expects the Minutes to show The Fed in no rush to raise rates, UBS warns the Minutes “could upset market perceptions of what is important to the Fed’s decision-making process."
With Venezuelan bonds re-collapsing as belief in a 30c recovery floor fades rapidly (and hyperinflating Venezuelan stocks soar - whether oil prices are rising or falling), the people of Maduro's socialist utopia have a new problem to contend with. After running out of toilet paper, and finding soap and shampoo hard to come by, AP reports Venezuela's more than 100 McDonald's franchises have run out of potatoes and are now serving alternatives like deep-fried arepa flatbreads or yuca, "because of the situation here; it's a total debacle."
- Twelve shot dead in Paris (Reuters)
- Eurozone Consumer Prices Fall for First Time Since 2009 (NYT)
- Euro's Drop is a Turning Point for Central Banks Reserves (BBG)
- How $50 Oil Changes Almost Everything (BBG)
- Mercedes-Benz Moving U.S. Headquarters to Atlanta (WSJ)
- Greek 10-Year Bond Yields Exceed 10% for First Time Since 2013 (BBG)
- How Even Dairy Farmers Get Squeezed by Rigging in the $5.3 Trillion Currency Market (BBG)
- AirAsia jet tail found underwater, black box may be close (Reuters)
- Italy Unemployment Rises to New High (Bloomberg)
Will 2015 be a year of financial crashes, economic chaos and the start of the next great worldwide depression? Over the past couple of years, we have all watched as global financial bubbles have gotten larger and larger. Despite predictions that they could burst at any time, they have just continued to expand. But just like we witnessed in 2001 and 2008, all financial bubbles come to an end at some point, and when they do implode the pain can be extreme.
Hope springs eternal that 2015 is the year that the US economy stretches its escape velocity growth as consensus growth expectations at 2.9% are still at their highest since 2005 (although world GDP expectations are falling rapidly). However, as Bloomberg's Rich Yamarone explains, with 5 of the Top 10 economies in the world in or near recession, the wall of worry can be constructed as follows...
- Average 10-year yield of U.S., Japan and Germany dropped below 1% for the first time ever: Free Money in Bond Markets Shows Global Economy Still Struggling (BBG)
- Brent falls below $52 as oil hits new five and a half year lows (Reuters)
- China Fast-Tracks $1 Trillion in Projects to Spur Growth (BBG)
- Saudi Arabia Raises Price of Main Oil Grade for Asian Buyers (BBG)
- Oilfield Writedowns Loom as Crude Slump Guts Drilling Values (BBG)
- Biggest Oil-Rig Drop Since 2009 Spells Tough Year Ahead (BBG)
- CIA says its inspector general is resigning at end of month (Reuters)
- Pipeline IPOs Climb on Demand for Returns Immune to Oil (BBG)
- Natural Gas No Savior for Investors Seeking Oil Refuge (BBG)
- Euro zone economy ended 2014 in poor shape (Reuters)
Same slide, different day, as the crude crash continues, with both WTI and Brent tumbling to multi-year highs, below $49 and $52 respectively. This happened despite the news overnight that China is accelerating 300 infrastructure projects valued at 7 trillion yuan ($1.1 trillion) this year, suggesting that China will focus more on fiscal policy than monetary easing, which in turn led to much confusion in the SHCOMP, which fluctuated up and down for the day several times before finally closing unchanged. There was no confusion about the stops slamming USDJPY, and its Nikkei225 derivative which tumbled 3%, sending Japanese Treasury yields to fresh record lows. Record low yields were also seen in Germany, Austria, Belgium, Netherlands, Finland, France (and many other places), which in turn forced the US 10 Year to finally dip back under 2.00%. In fact, taken together, the average 10Y bond yield of the U.S., Japan and Germany has dropped below 1% for the first time ever, according to Citi.
"Something Is Not Right" Jeff Gundlach Is "Concerned About Health Of The Economy & Financial System"Submitted by Tyler Durden on 01/05/2015 20:30 -0500
Having warned of the "terrifying consequences" of oil prices staying this low, DoubleLine's Jeffrey Gundlach, in an extensive interview with Finanz und Wirtschaft, warns he is "beginning to see signs of investor concern around the edges about the health of the economy and about the financial system. Historically, when junk bonds give up the ghost and treasuries remain firm, it is a signal that something is not right." Touching on everything from a string dollar to Indian stocks, and from Oil to bonds, and The Fed, Gundlach concludes, "the only places where there is inflation is in places that are painful. Raising interest rates against that backdrop seems like a poor idea. So I just hope the Fed thinks carefully about what it is doing." Boxed-in much?